Budgeting and Forecasting

Part 1

DQ 1

Discuss the relationship between budgeting and planning. How are they related? What differences exist between the two?

DQ 2

Discuss the difference between quantitative and qualitative forecasting. Does one provide a more accurate forecast than the other?

Part 2

DQ 1

Compare linear regression to the moving averages and smoothing techniques used in Part 1. Why is linear regression more appropriate for long-range forecasts?

DQ 2

What is seasonality, and what role does it play in regression analysis?

Part 3

DQ 1

Nonproduction expenses such as marketing, research and development, and general administrative costs can play an important role in a company's ability to meet long-term goals. Discuss how the budgets for each of these costs contribute to the company's success. Which do you think plays the greatest role and why?

DQ 2

What are capital expenditures, and how can they help a company achieve its long-term objectives?

Part 4

DQ 1

Explain what is meant by the time value of money, and discuss its relevance to the capital budgeting process.

DQ 2

Discuss the complications related to creating a forecast and budget for a new business.

Part 5

DQ 1

The sales budget is the starting point for the master budget. Discuss how it is prepared. Why is its accuracy so important?

DQ 2

Discuss how managers can use the cash budget as a monitoring and control tool.

Part 6

DQ 1

A coworker comes to you with the following problem: "I provided my boss a projection of factory overhead using the high-low method. He was unhappy with the results and told me to do more work and not return until I had a lower cost estimate. My initial analysis was based on data points for the last 24 months. By dropping the three highest data points, I was able to get a lower cost." Was what your coworker did unethical? Explain.

DQ 2

The differences identified in variance analysis are often interdependent. A favorable variance in one category may lead to an unfavorable variance in another, and vice versa. Identify and describe an example of interdependent variances, and discuss the trade-off that exists.

Part 7

DQ 1

Discuss the differences in the reports prepared for upper management compared to the reports prepared for lower-level managers. Why do these differences exist?

DQ 2

The sales forecast is often the starting point of the budgeting process. Identify and discuss key assumptions that are made in the creation of the sales forecast. How would you defend these assumptions when presenting your budget to the budget committee?